Nektar Therapeutics (NKTR) Q4 2015 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the Nektar Therapeutics Fourth Quarter and Year End 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call may be recorded. I'd now like to introduce your host for today's conference, Jennifer Ruddock, Vice President of Investor Relations. Please go ahead.

Thank you, Cathy. Good afternoon and thank you everyone for joining us today. With us are Howard Robin, our President and CEO; John Nicholson, our Chief Financial Officer; Dr. Ivan Gergel, our Chief Medical Officer; Dr. Steve Doberstein, our Chief Scientific Officer; and Dr. Jonathan Zalevsky, our VP of Biology. On this call, we expect to make forward-looking statements regarding our business, including potential regulatory approval decisions and commercial launch timings, the timing of future clinical results, clinical development plans, the economic potential of our collaboration partnerships, the therapeutic and market potential of certain drugs and drug candidates, as well as those of our partners, our financial guidance for 2016, and certain other statements regarding the future of our business. Because these forward-looking statements relate to the future, they are subject to inherent uncertainties and risks, that are difficult to predict, and many of which are outside of our control. Important risks and uncertainties are set forth on our Form 10-K, which was filed on February 29, 2016, and is available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments, or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com. And with that, I would now like to hand the call over to Howard. Howard?

Thank you, Jennifer. And thanks to everyone for joining us today for our fourth quarter and year end 2015 financial results call. On today's call, we will review our achievements over the past year discussing upcoming milestones for Nektar, and provide financial guidance for 2016. Ivan will also provide an update on the trials for NKTR-181 and NKTR-214, both of which are proceeding nicely. As you saw this morning, AstraZeneca announced a European agreement form MOVENTIG with ProStrakan, a subsidiary of Kirin in Japan, which has near-term significant economics to Nektar. Nektar is entitled to 40% of the payment that ProStrakan makes to AstraZeneca under their agreement. In 2016, we estimate that this will translate to over $40 million to Nektar, which is comprised of 40% of the $70 million upfront payment and 40% of the additional milestones we expect to be paid by ProStrakan to AstraZeneca for selected European county pricing approvals in 2016. In addition to these 2016 payments, Nektar will also receive 40% of all sales milestones paid to AstraZeneca by ProStrakan. And we will receive high single-digits to low double-digit royalties on net sales of MOVENTIG in Europe. Our U.S. royalty rate for MOVANTIK which starts at 20% and escalates is unchanged. And we are still entitled to global sales milestones for MOVANTIK. The agreement positions MOVENTIG for continued successful launches across Europe. ProStrakan has deep expertise in the marketing of pain medications in Europe and they have an existing portfolio of medicines to treat breakthrough cancer pain. You will recall that a substantial portion of all opioid prescribing in Europe is for cancer pain, and the label for MOVENTIG in Europe includes both cancer pain and non-cancer pain patients. As stated in AstraZeneca's press release, AstraZeneca and Daiichi Sankyo are committed to building the market for MOVANTIK in the U.S. As of mid-February, over 165,000 total prescriptions for MOVANTIK have been filled in the U.S. This is a substantial increase from the 64,000 total prescription mark from our last Q3 conference call and we're pleased with this performance. AstraZeneca and Daiichi recently initiated a new TV commercial to educate on OIC, in collaboration with a number of patient advocacy groups. The ad first ran at the Super Bowl, and I'm sure many of you saw it. This ad was very important in order to raise awareness about this serious and widespread condition among patients with chronic pain, and encourage patients to talk to their physicians about the condition. We all know that for patients with severe pain opioids are the only effective means to treat their pain. Unfortunately, this also comes with constipation, which can be as disabling to patients as the chronic pain that their physicians are trying to alleviate. Because there has not been a medication to treat this constipation effectively raising awareness of MOVANTIK as a new treatment option, is an important component of building the OIC market. Month-over-month U.S. MOVANTIK prescriptions are growing nicely and weekly prescriptions in mid-February were approximately 6,600. This translates to an annual run rate of approximately $94 million as of today. AstraZeneca and their marketing partner, Daiichi Sankyo, continue to be pleased with the growth of MOVANTIK, and importantly, the favorable reception that the medicine has received so far from the medical and patient communities. Now, let's talk about the great progress that Baxalta is making with ADYNOVATE for Hemophilia A, which was launched in the U.S. in November of last year. Last week Baxalta announced that they have filed supplemental BLAs with the FDA, to expand the use of ADYNOVATE, to both pediatric patients and surgical settings. The data from the pediatric trial of ADYNOVATE showed no treatment related serious adverse events and there were no patients with inhibitory antibodies to ADYNOVATE. The results of this trial will also support the filing in Europe, which Baxalta intends to complete this quarter. Baxalta continues to invest in ADYNOVATE to expand the product's value for more patients worldwide, in addition to the European filing, they expect regulatory approval of the treatment in Japan in the first half of 2016, and ADYNOVATE has also been filed in Canada and Switzerland. As you know, ADYNOVATE is the next generation ADVATE, a medicine which has global sales of over $2.5 billion, as an important continuation of the ADVATE brand; we are excited about rapid progress that Baxalta is making with the global launches of ADYNOVATE. On their last financial results call, Baxalta highlighted the blockbuster potential of ADYNOVATE and Nektar is entitled to receive mid-single-digit royalties on sales up to $1.2 billion, and royalties in the low-teens on sales greater than $1.2 billion, as well as an additional $55 million in sales milestones. As we have stated the in the past, the economic potential of MOVANTIK and ADYNOVATE alone, could contribute substantial revenues to Nektar, and move us towards becoming a cash flow positive company. In the case of area of anti-infectives, Amikacin Inhale and Cipro Inhale are being developed by Bayer, are also poised to become important new potential medicines that could represent significant revenue streams for our Company. Bayer expects data readouts from these Phase 3 programs in 2016 or early 2017. Cipro DPI and Amikacin Inhale are both novel drug device anti-infective products that have been granted qualified infectious disease product, or QIDP designation by the FDA. Both products are designed to deliver antibiotic deep into the lungs, in order to achieve both higher concentrations at the site of lung infection and lower systemic exposure, therefore significantly reducing toxicities that are associated with these agents when administered systemically. Cipro DPI is targeting non-cystic-fibrosis Bronchiectasis, or NCFB. The Phase 3 RESPIRE program featured two 48-week multi-national randomized placebo controlled studies, and Bayer expects top line data sometime next quarter from the first of these two trials. The second study has completed enrollment and Bayer expects to have data from this study in the second half of 2016. We estimate the market for Cipro DPI to be about $750 million and Nektar will receive an average 10% royalty on net sales. Amikacin Inhale targets gram-negative pneumonia in ventilated patients in the ICU. Bayer is expecting topline data from the Amikacin Inhale Phase 3 program in late 2016 or early 2017. We estimate the global market for Amikacin Inhale to be approximately $700 million, which could translate into highly significant revenues for Nektar, as we will receive a flat 30% royalty on U.S. sales and an average 22% royalty on ex-U.S. sales. I'd like to give you a brief update on another significant partnered program for Nektar, Ophthotech's Fovista for wet AMD. Ophthotech recently announced that their two Phase 3 trials combining Fovista with Lucentis, for the treatment of wet AMD, are both on track to deliver top line data in Q4 of this year. Based upon this timing, Ophthotech believes that if they can qualify for priority review, Fovista could be launched in the fourth quarter of 2017. In addition to our mid-single-digit royalty for Fovista, Nektar manufacturing will support the commercial supply chain and that will contribute to our revenue as well. The current market for therapeutics treating wet AMD is approximately $6 billion, so the Fovista royalty represents a very large opportunity for Nektar. Our strategy continues to be to balance our development risk across multiple drug candidates and therapeutic areas. This strategy has served us well and has resulted in a deep and valuable portfolio, which includes two approved and launched medicines with partners, MOVANTIK and ADYNOVATE; five Phase 3 partnered programs, which add significantly to our royalty revenue potential; and two highly valuable wholly-owned drug candidates, NKTR-181 for chronic pain, and our first clinical stage immuno-oncology therapy, NKTR-214. As a new opioid analgesic molecule, NKTR-181 could emerge as a significant advancement in pain medicine and as an important drug in addressing the major societal problem of opioid abuse, which has been at the forefront of the national political arena in the past year. NKTR-181's slow rate of entry into the brain is designed to reduce its euphoria and likability, as compared with highly abused opioids and opioid formulations. It could also have reduced respiratory depression in sedation as well. Since NKTR-181's properties are inherent to the molecule and are not a result of a formulation and it is not a precursor to a highly abused rapid acting opioid, it could also address the very serious issue of drug diversion in this country. In immuno-oncology, NKTR-214 has the potential to bring a new mechanism direct in selective stimulation of a patient's cancer fighting T-cells, to the next generation of cancer immunotherapies. In essence, NKTR-214 grows tumor killing T-cells in a way that no other immunotherapy does. We are very excited about the opportunities ahead of us with NKTR-214 and NKTR-181. And I'll now hand the call over to Ivan, to give you a quick update on both programs.

Thank you, Howard. Good afternoon. I'd like to start by giving an update on NKTR-181. First as we stated last quarter enrollment in our ongoing pivotal study SUMMIT-07 is ahead of schedule. The trial utilizes an enriched enrollment randomized with withdrawal design, and is evaluating NKTR-181 in opioid naive patients with chronic low back pain. We recently passed the 50% mark for patients completing the trial. The NKTR-181 Phase 3 study design included a single interim sample size assessment to be conducted by an independent analysis center after approximately 50% of the initially planned 416 patients completed the study. The protocol for this study defined only two possible outcomes for this pre-planned blinded interim sample size assessment; either an increase in sample size by 200 patients, or no increase in the sample size. The protocol stated that an increase in the sample size should occur if the conditional power at the midpoint of this trial was between 50% to 85%. But if the conditional power fell below 50%, or above 85%, the sample size was not to be changed. Yesterday, the IAC instructed Nektar to increase the sample size by 200 patients. And we're encouraged by this, because again, this means that the conditional power of the trial was determined to be between 50% and 85% at the halfway point. With the current pace of enrollment and with the trial enrolling ahead of schedule, the addition of these 200 patients will only add a few months to the trial and so we now expect to deliver topline data in early 2017, versus our original timeline of the fourth quarter of 2016. Patients from the ongoing SUMMIT-07 study are also rolling over into the 52-week long safety study of NKTR-181 which was initiated last year. Additionally as we stated in the past, we're planning a second Phase 3 study for NKTR-181, which will be conducted in opioid experienced patients. We plan to start this study in the first half of 2017 if we have positive results from SUMMIT-07. As how it's stated, NKTR-181 could become important in the fight against opioid abuse. We know that agonism of the new opioid receptor is the best way to treat many chronic pain conditions, but to-date formulation approaches with opioids have not sufficiently addressed the abuse problem. This has left physicians with the challenge of treating chronic pain patients effectively, while balancing the risk of opioid abuse. NKTR-181 is designed to provide physicians with an effective treatment for chronic pain that is inherently less euphorogenic. Because NKTR-181's properties are inherent to its molecular structure, it could represent a significant advancement in pain medicine. Now, let's move on to what we're doing in immuno-oncology, and in particular, the progress we're making with our Phase 1/2 trial for NKTR-214. As Howard mentioned, the dose escalation part of this study, which has a target enrollment of approximately 21 patients, is proceeding nicely. This stage of the trial is evaluating single agent NKTR-214, given once every three weeks. We're on track to report initial top line data in the second half of 2016. Both MD Anderson Neo Cancer Centers are actively enrolling patients into the trial. The study is open to patients with solid tumors, who had failed one or more other therapies, which could include checkpoint inhibitors. This dose escalation part of the trial will include patients with melanoma and patients with renal cell carcinoma, amongst others. In addition to evaluating tumor responses and safety, we're also capturing important biomarker data from both plasma samples and tumor biopsies, and once we achieve a recommended Phase 2 dose, we will expand into specific tumor cohorts to further evaluate the efficacy of NKTR-214 as a single agent. As we stated in the past, although this trial is open label, we will wait until we have data from a meaningful number of patients before we provide any results. NKTR-214 capitalizes on our novel chemistry approach, which allows us to optimize the relative affinity of a biologic for specific receptor sub-units within complexes. In the case of 214, we bias receptor sub-unit binding within the IL-2 receptor complex, in order to stimulate the production of tumor-killing Effector T-cells and natural killer cells, and to reduce production of regular 3-T cells which suppress the anti-tumor response. This unique biased mechanism differentiates 214 from other immunotherapies. We have demonstrated this receptor bias with NKTR-214 in animal models, where we observed a 400 to 1 ratio of CDA positive effect to T-cells, as compared to T regulatory cells within the tumor itself. To give you an idea of how meaningful this ratio is; treatment with IL-2 results in a ratio of 20 to 1, and vehicle results in a ratio of 4 to 1. We believe this explains why NKTR-214 results in dramatic tumor growth delay and complete responses as a single agent, in the very difficult to treat preclinical tumor models of melanoma and lung cancer respectively. Specifically, in the highly aggressive Lewis lung carcinoma model, we observed a 60% complete response rate following treatment with single agent NKTR-214. It is of note that aldesleukin in this same experiment had no anti-tumor effect. With respect to safety, our non-human primate studies indicated no evidence of vascular leak syndrome or hypotension, which are the two most important dose-limiting toxicities with aldesleukin. We've also observed synergistic anti-tumor immune responses with NKTR-214, in combination with PD-1 and CTLA-4 inhibitors, notably in tumor rechallenge experiments with NKTR-214 in combination with anti-CTLA-4, or anti-PD1, we observed durable and long lasting responses after only a single course of the combination was administered. Although it is a cytokine, NKTR-214 is designed to be dosed like an antibody, similar to the dosing schedules with checkpoint inhibitors. NKTR-214 could be an ideal combination drug in the evolving landscape of immune-oncology, and we are currently designing a combination dose escalation trial for NKTR-214, with an anti-PD1 agent, which we plan to initiate in the third quarter of this year. In research, we're exploring additional immuno-oncology candidates and immunology candidates. For example, NKTR-255 which is an engineered IL15 immuno-oncology candidate, designed to increase the memory T-cell response. Dosing native IL-15 has proven difficult, because of its short half-life and need for high levels of dosing, which can contribute to serious side effects in humans. We're also addressing other uses of our bias receptor technology in controlling the immune response. We plan to identify our next IND candidate in 2016. And with that, I'll turn the call over to John for a discussion of our financial results.

Thank you, Ivan, and good afternoon everyone. I will start with a brief review of Nektar's 2015 financial results, and will then discuss 2016 financial guidance. At the end of 2015, cash and investments were $308.9 million, which includes net proceeds from a financing transaction that closed on October 5th, 2015. 2015 total revenue was $230.8 million, as compared to 2014 revenue of $200.7 million. 2000 revenue includes milestones related to MOVANTIK and ADYNOVATE. For MOVANTIK we recognized $90 million of the $100 million milestone payment from AstraZeneca, following the U.S. commercial launch, and we recognized a $40 million milestone payment from AstraZeneca following the first commercial sale of MOVENTIG in the EU. We also recognized a $10 million milestone from Baxalta for the approval of first commercial sale of ADYNOVATE in the U.S. For the full year 2015, total operating costs and expenses $260.2 million as compared to $217.2 million in 2014. The increase in total operating costs and expenses were primarily the result of higher R&D expense. R&D expense was $182.8 million for the full year 2015, compared to $147.7 million in 2014. 2015 R&D expense included the ongoing NKTR-181 Phase 3 program, included SUMMIT-07, a 12-week efficacy study, and SUMMIT-08, the long-term safety study. IND enabling, manufacturing and final preclinical activities for NKTR-214, in addition to the initiation of NKTR-214 Phase 1/2 program in Q4 2015. The commercial scale-up of device production for the Amikacin Inhale program, and ongoing monitoring expense for patients still in the NKTR-102 Phase 3 BEACON study. Research and development expenses included $16 million of stock-based compensation and depreciation expense in 2015. For full year 2015 G&A expense was $43.3 million, compared to $40.9 million in 2014. 2015 G&A expense included approximately $10 million of stock-based compensation expense and depreciation. Now, onto our 2016 financial guidance. Revenue for 2016 is expected to be between $155 million and $165 million. As Howard stated, the 2016 revenue guidance includes recognition of approximately $40 million of upfront and other milestone payments to be received from AstraZeneca for licensing of MOVENTIG to ProStrakan in the EU. We have also included in the 2016 revenue guidance, royalty revenue of approximately $22 million from MOVANTIK. This represents sales in Q4 2015 through the end of Q3 2016. Course as a reminder we recognize royalties one quarter in arrears. This projection includes a weekly growth in total prescriptions of approximately 3% throughout 2016. We are not providing royal estimates for ADYNOVATE in 2016. Although the product was launched in November of last year, we believe we should have several quarters of sales before we incorporate royalties into our financial guidance. Our 2016 revenue guidance also includes approximately $24 million of non-cash royalty revenue from UCB CIMZIA and Roche's MIRCERA. Now on to R&D expense for 2016. We anticipate GAAP R&D expense for 2016 to be roughly equivalent to our expense in 2015, with a range of between $180 million and $190 million. This includes $19 million of non-cash expenses. Our 2016 R&D expenses include the advancement of a number of key pipeline programs, including expenses for the NKTR-181 Phase 3 program, which includes the first efficacy study, and ongoing course for the ongoing safety study. Expenses for the NKTR-214 Phase 1/2 program, which includes the ongoing safety and efficacy study, initiation of a dose expansion study for NKTR-214 as a single agent, and the initiation of a combination dose ranging study. Expenses related to our next IND filing and expenses to relate to commercial manufacturing readiness activities for Amikacin Inhale under our agreement with Bayer. 2016 G&A expense is anticipated to be between $40 million and $42 million, which is lower than the 2015 G&A expenses. Included in our 2016 G&A expense is approximately $11 million of non-cash items for depreciation and stock-based compensation. For 2016, interest expense will be approximately $23 million and non-cash interest related to UCB CIMZIA and Roche's MIRCERA royalty monetization will be approximately $20 million. In 2016, we expect our net use of cash will be less than $110 million, and as a result, we plan to end 2016 with approximately $200 million in cash and investments. With that, I will now open for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Jonathan Aschoff with Brean Capital. Your line is open. Please go ahead.

Thanks. I'm a little bit confused about something guys. Why would you not have increased the 181 trial size if the powering was below 50%? Wouldn't that have been low and bad? Could you help me understand that a little better?

Yeah. Jonathan that's a good question. I think there's no right or wrong answer to sort of -- where you sort of decide to increase the power. But I think we picked 50% to 85%, because our feeling was that was a good range, and we would be able to increase, not increase -- you would really have to put very large numbers into the trial if it was below 50%. And we didn’t -- we felt if it was below 50% power, and of course it can be anywhere from 50% to 85% power, 50% is the low range, we'd like to hope we're close to the 85%, but anywhere within there, you're going to make a meaningful difference by adding 200 patients to the study. You're going to increase the likelihood of demonstrating statistical significance between the active agent and placebo. Our feeling was that going well below 50%, we'd have to put many, many more patients in, and we didn't feel it was worth the investment.

Okay. But if it was below 50%, you would have stopped the trial if what I'm reading from that, yet you said the only two outcomes were to add or not add patients. So, that's where I am confused?

Yeah, yeah. Sorry. Let me explain that. There are only two outcomes. So, the outcomes are, between 50% and 85% we increase the number of patients. However, if it was below 50% or 85%, we would do nothing. However, we would not have known whether we hadn't added patients, because it was above 85% or because it was below 50%. So, giving us more -- we obviously didn't want to take an alpha hit, and there was no unblinding. So, we preset these criteria. We know nothing else about this study, other than the fact -- we would have known nothing else about this study, other than the fact that it was between 50% and 85%, or essentially it wasn't between 50% and 85%. If it wasn't between 50% and 85% we would have done nothing. We now know it was between 50% and 85%, so clearly we added 200 patients. Does that help?

Okay. So, do you know which arm is outperforming which arm?

Do we know which arm is outperforming which arm? You mean the type 2, but the statistical analysis would indicate the way that this, we designed this, it is clear that the active arm would be outperforming the placebo arm.

You said it was blinded

It was blinded to us, sorry Jonathan; I apologize. We had an independent group doing this. We had an independent group doing this.

All right. Thank you. Did I miss this or did you give the MOVANTIK -- actual MOVANTIK royalty in the fourth quarter that was accrued over the third quarter?

No, Jonathan, we haven't released that as of this point in time.

Okay. So, you're just going to stick with the 2016 guidance on that, in terms of a quantitative sense of where MOVANTIK is headed?

That's correct.

This is Howard. Jonathan, we said that you could look at approximately a 3% weekly growth rate on scripts, so that should give you some guidance as to how we feel the product will do.

Okay. And what is the capture, the IMS capture, how high is that?

Yeah. So, Jonathan, I mean basically where we are at right now is it is as Howard said earlier, basically for the first couple weeks of February, we're averaging around 6,600 scripts, but if you look at it from the standpoint of where we were from the standpoint of at the beginning of the year to where we are today, basically we've seen an increase in scripts of an average of about 4.6%.

Okay. So, I'll just compare to the 6,600. And I was curious the large jump in the product sales and royalties of about $10 million, if I add the royalty pharma stuff to the other product sales and royalties, I'm just wondering why the fourth quarter jumped so much from about $13 million to $23 million?

Basically what that had to do with, Jonathan, was we recognized the $10 million from Baxalta for the ADYNOVATE being launched in the U.S.

I had that in a different line. But I mean I can deal with that later. Thank you very much, guys.

Thank you. Our next question comes from the line of Jessica Fye with JPMorgan. Your line is open. Please go ahead.

Hey guys. This is Ryan on for Jessica. Appreciate you taking our questions. I guess with the increased size of the SUMMIT-07 study, as you think about the long-term safety study, do you expect to rollover more of those patients, and therefore expand that long-term safety study? Or are you going to keep it fixed? I think on clinicaltrials.gov, it said about 600 patients?

Thanks for the question, Ryan. We're going to keep it -- essentially we are going to keep it fixed. We need certain numbers of patients at certain doses, we're trying to satisfy sort of the regulatory criteria for certain amount of safety exposure. So, it's essentially going to remain fixed. It won't have necessarily an impact on the size of that study. We may roll over more patients, as opposed to taking in de novo patients given the study increases. But the reason we wanted to have the safety study well underway, is that when it comes to filing, we clearly don't want to have a safety study delaying the filing dates. So, we like to get that stuff done quite early in the program.

Got it. So, does that mean that you could probably -- you could fill that program and read out, then have those results sooner in hand?

Well, I'd say -- are you talking about the open label safety study?

Yes.

Yeah. Really its more -- it's a safety study per se and it is open label, so we're clearly collecting adverse event reports from that study. We will and likely collate them if you like into a final study report until the study is completed, and there's a good likelihood that if the trials work out successfully, patients will remain in that open label safety study, and we'll take a cut of it when we file the NDA, but we allow patients to continue on the medicine through the filing date and well through the approval date.

Okay. I guess for 214, with the data that's coming in the second half of this year, since it is a Phase 1 and it is the dose escalation part, what is it that you are looking for exactly?

So, essentially four groups of things. Firstly, obviously, safety information. We're collecting that all of the time. And as we said previously if you don't hear anything from us, that's a good sign, because we are not seeing safety signals. The second thing, obviously the design of this study is to identify the dose that we take into the escalation study. Thirdly, we are undertaking a plethora of biomarkers -- looking at a plethora of biomarkers, both blood biomarkers and also tumor tissue biomarkers and we're doing extensive analysis of those. And finally, of course and perhaps most importantly, we're going to be looking for responses based on scans. And there's a large amount of data. As I said, it's going to come to us on an ongoing basis, but we want to have a reasonable amount of it before we publicly talk about it.

Okay, great. Thanks for taking my questions.

Thank you. [Operator Instructions] Our next question comes from the line of Bert Hazlett with Ladenburg. Your line is open. Please go ahead.

Thanks. Thank you for taking the question. Congratulations on the progress. With regard to 181, I guess Ivan, if you'd be so kind, so we're looking at, in terms of timing, a 2017 data readout now for this. How rapidly do you think the additional studies can then be spooled up, and wrapped up for a potential filing? And are they, do you think that they might -- another Phase 3 might be necessary? Is that your understanding here?

Well, certainly plan a second Phase 3 study, Bert. We'll do SUMMIT-07, which is in opioid naive patients. That study we now believe will complete, in other words, will have results early in 2017. We are planning -- assuming it is successful; we're planning to initiate what we call SUMMIT-12, which will be in opioid experience patients pretty much as soon as we have the results from SUMMIT-07. I would envisage that study will take us maybe somewhere in the region of -- I don't know, this one round about over sort of a period of about maybe 18 months to run that study, something like that, and then to collect results and file will potentially be another six months or so. So, I assume that's two years from sort of early 2017. So, one might be looking at a file hopefully in early 2019.

Okay. Thank you. And then I guess shifting gears. Just to continue on then, excuse me. Is there any chance that could study early -- that study that second Phase 3 could start early, knowing what you know now about the powering? I mean you're going to wait to turn over that card, is that a fair assumption?

Yeah, look -- this is Howard. That study is designed; I think it can be started earlier. The question is it's a decision of risk taking and an issue of how much we want to spend without having results in our hand yet. I think it is encouraging that the power, that we know the power is between 50% and 85%. However, as I've said in the past, I don't want to start the second Phase 3 study, which will be in opioid experienced patients, I don't want to start that until I understand the results of the first Phase 3 study. So, when we have those results in early 2017, as soon as that looks positive, we will start the second Phase 3 study. It's already been designed, it will be ready to go by then, and I don't think we will have very many delays in starting it.

Just to add, so we will wait. To add to Howard's point, as I said, we know the power now is between 50% and 85%. Adding 200 patients actually increases the power of the study, increases the likelihood of rejecting the hypothesis.

Okay. Thank you for the clarity. Just shifting to 214. What are the gating items to the combination study with the anti-PD1 later this year? Maybe you touched on this earlier, and if you did, my apologies. A little bit more on that trial design would be helpful? Thank you.

So, you want to -- the gating issues with the combination study was that -- is that the question, Bert? So, I just want to be clear.

Yeah. The gating issues there? And then anything you can provide on the trial design for that would be helpful?

Well, okay. So, we're still designing the trial at this point, so it would be slightly premature to talk about the design of that study. Clearly, we'd see combining NKTR-214 with anti-PD1 therapy, very lightly initially in tumors in which the PD-1s are already approved or indicated for therapy. Regarding the gating, I think one of the things we're looking for -- initially of course, we want to go through at least a couple of cohorts in the monotherapy study and see what the profile looks like, and obviously, we're looking to see that the drug is safe, and then we'll turn to initiating potentially the combination study.

Okay. Thank you. And just on 214, at AACR, do you intend to provide any update or commentary on the current clinical study in abstract 558 in your discussion?

At this point, as we said, we don't intend to provide clinical data until the second half of this year.

Okay. Thank you.

Thank you. Our next question comes from the line of Michael Higgins with ROTH Capital Partners. Your line is open. Please go ahead.

Thanks operator. Hi, guys, nice quarter. A question for you, Ivan seems to be the star of the show tonight, question on 181 for you. After the tumor patients are added on, what does that increase the power of the trial to -- from the 50% to 85% range, up to what kind of a range?

Yeah, Michael that's a great question. I think there's a lot of unknowns here clearly. It's all blinded. So, we're speculating. We don't know variability; we don't know the effect sizes, et cetera, et cetera. However, as a sort of gestalt, if you will allow me that, I think what it takes, our back of the envelope calculations take it from somewhere, the range of 50% to 85%, I think we now look at something in the range of 65% to 95%, that's a sort of slide if you like on the power.

Okay. That assumes the midrange of your assumptions I assume?

No. when I -- so if I start at the bottom at 50%. The extremes are obviously 50% power, with the incremental number of patients, the 50% moves to a 65% number. And if we were at the 85% point at this point, because we clearly don't know where we are, that 85% would move to a 95%. So, we're somewhere between 65% and 95%, so the midpoint of that would be, I'm doing math in my head here, about 80% power.

Sorry, I should ask follow-up a little bit better, my apologies. What I'm asking, is to take it from the 50% to 85%, to 65% to 95%. If you up those, is that assuming the midpoint of the variability midpoint on patient enrollment size, and midpoint of every other assumption going into the trial's overall assumption?

What it's assuming I think are the assumptions are things stay relatively stable from the point of the midpoint conditional power analysis, right. But once again, a huge caveat here. We are dealing with a massive range of uncertainties. We don't know -- all we had is an outcome from an independent group, who said, up the sample size by 200 based on a preset criteria, so that's -- if that helps.

Yes, understood. You definitely have to speculate on a number of things. I assume there are some proxies within theme trials that you can look back to, that used a 50% to 85% or some sort of a range in previous and interim checks. Where are those trials? And what were the outcomes of those trials?

It's very interesting. I don't -- I can't sort of aggregate that information. I think a couple of public caveats at this point. We know that there's huge variability across these types of pain studies. One that I was certainly involved with a few years back was the BELBUCA clinical program where we did an interim analysis on one of the studies and not on the other one.

Right.

And at the end of the study we had very strong results, so -- but that was -- the stronger result came actually in the study which had the interim analysis. They both had interim analysis. One of them increased sample size. That was the one with the stronger results at the end of the study. That obviously doesn't mean that will necessarily be the case here. I think what we've done here is slightly different, because we didn't want to take -- we wanted to avoid taking an alpha hit. And we wanted to avoid unblinding in any way, shape, or form. So, we had to preset numbers that made a lot of sense to us, which was that 50% to 85% range, if you like.

Okay. And I forget was that the opioid naive set of the two was probably that you had the interim?

They both had interims. The one that was increased was actually the opioid experienced.

Okay. Appreciate it. Thanks, guys.

Thank you.

Thank you. And that does conclude today's Q&A portion of the call. I'd like to turn the call back over to Howard Robin, President and CEO for any closing remarks.

Well, thank you all for joining us this afternoon. Again, I'd like to thank our employees for their hard work and dedication to the company. And I think we made some excellent progress and we have an awful lot to look forward to this year. So, I'm very enthusiastic about it. And we look forward to seeing all of you at the upcoming various conferences throughout the spring. Thank you. Have a great evening.